July 2013

July 31, 2013

American Airlines' parent company, AMR Corp., reported a $259 million profit in June, according to a court document filed on Thursday.

Excluding $33 million in reorganization fees and other accounting items, the Fort Worth-based carrier would have posted a monthly operating profit of $292 million. The financial disclosure is part of the monthly operating reports AMR is required to file with the bankruptcy court.

The company said it spent $19 million on aircraft financing renegotiations and rejections and $13 million on professional fees during the month. It also spent $1 million on "other" reorganization items which are not detailed in the report.

AMR also said that its mainline carrier, American Airlines, had passenger revenues of $1.8 billion with its regional affiliates, including American Eagle, bringing in $264 million in revenues. Total revenues for the month were $2.34 billion.

The company ended the month with $600 million in cash and $5.6 billion in short-term investments for a total of about $6.2 billion on hand. That number does not include $863 million in restricted cash.

AMR is expected to close its merger with US Airways in the third quarter pending government approval of the deal.

July 30, 2013

The city of Fort Worth filed an objection to AMR Corp.s bankruptcy reorganization on Tuesday, saying the Fort Worth-based carrier should not be allowed to terminate its lease on its former Alliance maintenance facility as part of its restructuring plan.

In the filing, city attorneys say American Airlines’ parent company did not list the Alliance lease as one of the contracts it plans to keep as part of its restructuring. Separately, the filing also seeks to enforce a court order related to an “illegal discharge into the city’s sanitary sewer” in December 2012.

“What we’re trying to do is just preserve our rights for both those issues,” said Chris Mosley, the city’s senior assistant attorney. He said the city is in negotiations with American to terminate the Alliance lease.

American still holds the lease to the Alliance Airport maintenance facility which it closed and vacated earlier this year. The carrier has not asked the bankruptcy court to terminate its lease but Mosley said the city expects a separate filing by AMR to reject the lease by Aug. 15.

As long as American holds the 99-year lease, the city is unable to re-lease the facility to another company. When American announced it was shutting down the maintenance base last year, city officials began marketing the space to a dozen potential companies and had two firms tour the facility.

AMR declined to comment on the city’s filing.

The bankruptcy court has scheduled a hearing for Aug. 15 to consider confirming AMR’s restructuring plan which includes a merger with US Airways. Creditors had until Monday to vote to approve or reject the plan.

Several other interested parties also filed limited objections which were due Tuesday. Denton County and the city of Waco filed a joint limited objection related to unpaid property tax claims. Los Angeles County also filed an objection related to tax claims.

Two pilots groups — the former TWA pilots and the US Airline Pilots Association, which represents US Airways pilots — objected to AMR’s restructuring plan. USAPA said the plan does not include a feasible plan particularly in regards to AMR’s regional carrier, American Eagle.

“Debtors must demonstrate that, after confirmation, Debtors’ business plan is likely to provide sufficient cash flows and profitability to avoid the need for another bankruptcy filing. Here, they have not done so,” the USAPA filing said.

At the airport board’s operations committee meeting on Tuesday, board member Bernice Washington said there may be “substantial overruns and costs” as part of the project that is renovating Terminals A, B, C, and E.

“We have what we consider some potential challenges and we want the whole board to be aware of these challenges,” Washington said, adding that a full report will be made to the board at the September meeting.

There are three factors contributing to the potential cost overruns, Washington said, although she did not mention how much over-budget the project might be. Building material costs have increased significantly since the project started two years ago and the airport has found more asbestos in Terminal B than they had anticipated. Washington said there may be $52 million in additional project costs because of the asbestos.

The third issue causing construction delays is the pending merger of US Airways and the airport’s largest tenant, American Airlines. The airport staff issued a stop work order for the ticketing area currently under construction in the middle of Terminal A because of a “lack of precision on proposed changes from American,” Washington said.

“They are in flux because they are coming out of bankruptcy with new leadership...which is causing some substantial delays on making decisions for us,” she said.

So far, the airport has $1.25 billion in contract commitments for the seven-year project.

Separately, airport board members were also briefed on the staffing problems at Terminal D’s customs area that has led to long lines for international passengers. On July 22, passengers were waiting over three hours as 93 international flights with 10,518 passengers moved through the customs area. Although Terminal D has 60 immigration lanes, the U.S. Customs and Border Patrol had an average of 23 agents on staff with only 10 at the lowest staffing point of the day.

“This is by far the worst day we’ve had since we moved into Terminal D,” said Byford Treanor, vice president of customer service for the airport, adding that over 4,111 passengers waited over 60 minutes to clear through customs.

DFW has the longest average wait time through customs at major U.S. airports with a 28 minute average wait. At 69 minutes, DFW is second to JFK and its 83 minute wait for the longest average peak wait time through customs.

The airport said it has been lobbying local congressional leaders to fund more customs agents and has been marketing the Global Entry program. It is also plans to unveil 30 automated passport control kiosks in November to help reduce wait times in the customs area by allowing U.S. passengers to enter their own information to customs questions before reaching an agent.

“This summer we’ve had significant growth in international service and if you go back to 2009, we have averaged over a 29 percent increase in passengers and zero growth in officers so that hits on the issue we have in customs,” Treanor said.

The government agency said the Dallas-based carrier advertised one-way, nonstop fares for $100 or less on Valentine's Day this year but did not include a reasonable number of seats on the routes marketed in the fare sale.

"Consumers should be able to trust that the price they see advertised is the price they’ll pay for a seat,"U.S. said Transportation Secretary Anthony Foxx.

Southwest also advertised $66 fares between Dallas Love FIeld and Branson, Mo. on January 30 but there were no seats available during the sale period of March 1 to March 21, the DOT said.

"These were temporary and unintentional circumstances that were aggravated by a technical glitch in our inventory and sales systems," Hawkins said. "We’ve worked with the DOT to address their concerns and have corrected the issues internally to prevent this from happening again."

The contract between Lockheed and the Pentagon will be released once details are finalized, but estimates show that "in principle" the new agreement for lots 6 and 7 of the aircraft come at a cost that is eight percent less than the contract signed for lot 5 in December. (The unit price for all three variants of the F-35 is roughly 4 percent less than the previous contract, Pentagon officials say.)

Cost reductions will allow the Pentagon to purchase more than 2,400 aircraft, including those that were in jeopardy of being cut due to budget tightening.

"These two contracts represent a fair deal that is beneficial to the government and Lockheed Martin," said Lt. Gen. Chris Bogdan, the F-35's Program Executive Officer. "Improving affordability is critical to the success of this program, and by working together we were able to negotiate a lower cost F-35.

"There is still work to be done, but these agreements are proof the cost arrow is moving in the right direction. We will continue to work with industry to identify areas for savings in future production contracts."

The new contracts will also include the first F-35s for Australia, Italy, Norway, and the fourth F-35 for the United Kingdom. In addition to procuring the air vehicles, these contracts also fund manufacturing-support equipment and ancillary mission equipment.

Deliveries of 36 U.S. and partner nation aircraft in lot 6 will begin by mid-2014 and deliveries of 35 U.S. and partner nation aircraft in lot 7 will begin by mid-2015.

Lorraine Martin,Vice President and General Manager of the F-35 program at Lockheed Martin, said that Lockheed is committed to working with the Pentagon.

The U.S. and eight partner nations plan to acquire more than 3,100 jet fighters.

Israel and Japan have also announced plans to purchase the jet under Foreign Military Sales agreements.

The agreement in principle reached between the Government and Lockheed Martin are for air vehicles and do not include the propulsion systems. The lot 6 engine contract is currently being negotiated between the government and Pratt & Whitney.

July 29, 2013

-Asiana Airlines pilots apparently had difficulty landing at San Francisco International Airport prior to the crash that occurred on July 6. According to the San Francisco Chronicle, the Korean airline had an unusually high rate of aborted landings at SFO. "One such aborted landing happened July 19, just days after SFO reopened the
runway where Flight 214 crashed. The Asiana jet pulled out of its
early-afternoon landing just 14 seconds from touchdown," the newspaper reports. "Sources tell us the plane appeared to be coming in too low and too fast. The
plane landed without incident 18 minutes later."

-Boeing is asking airlines to inspect the emergency beacons on its planes after ANA and United both found faults in the devices on Boeing 787s. The fixed emergency locater transmitters are also on Boeing 717, next-generation 737, 747-400, 767 and 777 aircraft, this Bloomberg article reports.

-And last week, the FAA proposed a $2.75 million fine against Boeing for not fixing its quality-control system in a timely fashion after the manufacturer found mechanics installing nonregulation fasteners in 2008. "The FAA concedes Boeing stopped using these nonregulation fasteners after discovering the problem," the Seattle Times article says. "However, it alleges Boeing did not immediately address the quality-control issues that had allowed mechanics to install the wrong fasteners."

Today is the deadline for AMR Corp. creditors to decide to accept or reject the Fort Worth-based carrier's restructuring plan that includes a merger with US Airways.

Creditors have until 4 p.m. CDT on Monday to cast their votes on the plan. The bankruptcy court will then consider confirming the restructuring plan of American Airlines' parent company at a hearing on August 15 in New York.

If creditors want to file an objection to the plan, they must file it with the court by July 30. Responses to the objections are due a week later.

At previous hearings considering the restructuring plan, the U.S. bankruptcy trustee has filed an objection to the $20 million compensation package for AMR chief executive Tom Horton. The judge has made no decision on the compensation for Horton, who will stay on with the new company as a non-executive chairman.

July 25, 2013

Southwest Airlines reported a $224 million profit for the second quarter, down 1.7 percent compared to the second quarter of 2012.

Revenues grew slightly, up 0.6 percent to $4.6 billion as the carrier increased capacity by 3.0 percent in the quarter.

"While the lingering effects of government sequestration and higher taxes continued to be a drag on air travel demand, second quarter 2013 revenues and passenger traffic still reached record levels," said Southwest chief executive Gary Kelly in a statement.

Excluding one-time accounting items, the carrier said its income was $274 million, or 38 cents per share, matching Wall Street analysts estimates, according to First Call.

Southwest said it spent $3.06 per gallon on jet fuel in the quarter, down from $3.22 per gallon in the second quarter of 2012. It expects fuel costs to be in the $3.05 to $3.10 per gallon range for the third quarter, which is also lower than what the carrier spent in that quarter last year.

Southwest executives will discuss the carrier's quarterly earnings on a webcast with investors at 11:30 a.m. CDT.

July 24, 2013

American Airlines' first Airbus aircraft landed at Dallas/Fort Worth Airport at 3:38 p.m. on Wednesday afternoon.

The Airbus A319 will enter into service in September, flying out of D/FW to Charlotte, Cleveland, Memphis and Wichita, Kan. The Fort Worth-based carrier is using the A319s to replace its aging MD-80 fleet.

"Everything about the new A319 aircraft has been designed with the customer at the center," said American's chief commercial officer Virasb Vahidi in a statement made on Tuesday when the carrier accepted the plane from Airbus at the manufacturing facility in Hamburg, Germany.

The new plane has leather seats, Wi-Fi and in-seat entertainment. American said there are individual power outlets and USB jacks at every seat. According to SeatGuru.com, the A319 will have 128 seats, including 8 in first class and 18 Main Cabin extra seats.

The aircraft arrived from Bangor, Maine where it had made a fuel stop after leaving Germany.

"We are pleased that as part of the approval process, the EU Commission has completed an initial market investigation and identified only one city pair that raises competitive concerns, London-Philadelphia. US Airways and American Airlines have provided commitments to the Commission that address those concerns, and we believe we are on track to receive clearance in Europe. Importantly, with increased connectivity and more than 450 daily flights to 119 domestic and international destinations, including 18 in Europe and the Middle East, PHL will continue to be a key hub and international gateway for the new American Airlines. In addition, the combined network will continue to provide significant options for traveling to London and the rest of Europe through hubs and other key airports. The merger is expected to be completed in the third quarter of 2013, and we look forward to continuing to work cooperatively with the EU Commission as we move through the regulatory approval process to create the new American Airlines."

European regulators appear concerned about having more competition on the Philadelphia-London route which is currently served by US Airways and British Airways, which is American's joint business partner in the oneworld alliance.

The EU said it plans to issue a decision on approval of the merger on August 6. The U.S. Department of Justice is currently reviewing the merger deal along with nineteen state attorney generals who are concerned about losing air service or hubs after the merger is complete.